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Can Vertro, Inc. Erase Mistakes that Sank Miva or Will Management’s New Direction Lead Down Same Path?

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Vertro, Inc. (NASDAQ: VTRO) has been doing all it can to erase its disturbing past as Miva, Inc. and while the Internet information provider has certainly moved away from the ugly fraud claims and inability to compete effectively there remain a number of questions surrounding the ability of management to direct the company down the path to success.

As it stands, that path will be determined by VTRO’s concentration on ALOT, their product portfolio that entails a toolbar, homepage, and desktop applications all designed to make using the Internet easier for consumers. Through this portfolio VTRO aims to provide these consumers with direct access to relevant content and search results through their queries.

Having shed the name Miva back in June 2009, Vertro has since completed a 1-for-5 reverse stock split that essentially enabled them to remain in compliance with NASDAQ listing requirements and has shown solid growth with their live toolbar, reporting earlier this month that they had topped 10 million users for the first time in company history, a figure that represents an 11% jump since metrics were reported on September 30, 2010. Of those 10 million, more than half were from the U.S., Canada, U.K., Ireland, Australia and New Zealand, known as region one.

It is through this growth in ALOT users that VTRO aims to capitalize monetarily as the company has a number of third-party search and content agreements and the impressive figures in region one comes hope among shareholders that Vertro is heading in the right direction.

With the improvements has come a spike in share price as the company has gone from an adjusted close of 2.21 on August 18 following the reverse split to a 52-week high of 7.25 posted on November 26. Now the bets are being placed by investors, with many seeing shares surging past the 10.00 mark heading into 2011 while others are predicting a fall back to the 2.00-3.00 range.

A lot will be determined over the next several weeks as the web marketing firm can answer a lot of questions during the holiday season, essentially answering concerns about the company’s ability to capture a web market that is full of competition; competition which includes giants like Google.

What makes VTRO interesting is that shareholders can really have an effect on the company’s earnings. This can be done by shareholders actually using the services provided by VTRO to increase their monetization from those third-party search and content agreements; a huge advantage over something like a biopharmaceutical company that has developed a cancer treatment- if the shareholder isn’t diagnosed with cancer then they won’t likely be using the drug.

Of course there has been some speculation that VTRO may be on the radar for a takeover and while some shareholders may be hoping for something like that to occur the immediate chances of that happening are pretty slim. VTRO is now seeing potential and such a takeover would involve a substantial investment, especially with the company’s recent growth report and their favorable third quarter figures that showed an increase in revenue to $9.8 million compared to second quarter revenue of $8.5 million.

Vertro knows that if it can just put some more space between itself and Miva then investors may shake off their old misgivings and accept the company for what it is and not what it was. It will take more than just time though, it will require a real dedication to doing things differently and that will require building a history of smart decisions. That could be a difficult task as Miva built a reputation of making poor decisions that cost them a shot at significant revenue through pay per click advertising, an arena they were in before Google.

Most perplexing to shareholders may be management’s insistence on holding on to the PPC model for as long as they did despite its massive cost to the company. While their ALOT product (then known as Miva Direct) was bringing in significant revenue that revenue was essentially being burned to keep Miva’s PPC plans alive. After nearly two years management finally had enough of the PPC game and sold the business and decided to focus on their ALOT portfolio, a decision that could have been made much earlier and benefited shareholders desperate for good news.

For VTRO to erase those painful memories they will likely poor a substantial amount of money into marketing, showing web users how their toolbar and applications are capable of producing better search results and making their web life a bit easier. Aside from their public relations campaign to “make the internet easy,” VTRO will also need to continue developing their products, improving search results as well as encouraging its users to utilize the search function, and that would in turn produce more revenue. Most important to VTRO is retaining the consumers who use the toolbar and applications and if they focus their attention on that then there would be no reason for their business to slow.

Now that they have had an opportunity to settle some of the financial headache left behind by Miva the management of Vertro have a shot at doing things right, investors now just have to bet on whether they can learn from their past mistakes. As was stated before, this holiday season could determine whether or not the past gets buried and Vertro hits 2011 running. More and more people are turning to the Internet to satisfy their shopping needs and if those shoppers utilize the search function ties to the Vertro toolbar then it could be a very profitable quarter.

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